As recent college graduates face one of the toughest job markets in years, Berkeley economist and voluble Substacker Brad DeLong has a message for those struggling to land their first full-time gig: Artificial intelligence (AI) and automation are not to blame. Larger forces are at work.

DeLong, a professor at UC Berkeley and former Deputy Assistant Secretary of the Treasury, argued in a recent essay that the challenges confronting young job-seekers today are primarily driven by widespread policy uncertainty and a sluggish economy—not by the rapid rise of AI tools like ChatGPT or data-crunching robots. DeLong offered his analysis on July 23, roughly 10 days before the July jobs report stunned markets, revealing that the economy has been much weaker than previously thought for several months.

Prominent business leaders had also flagged troubling signs in the economy before the July jobs report dropped. IBM Vice Chair and former Trump advisor Gary Cohn went on CNBC a day before the jobs data, noting “warning signs below the surface.” Cohn said he pays close attention to the quits rate in the monthly JOLTS data, arguing that 150,000 fewer quits was an ominous sign of poor economic health.

DeLong sounded a prophetic note, writing that “policy uncertainty” over trade, immigration, inflation, and technology has “paralyzed business planning,” leading to a self-reinforcing cycle of hiring freezes. New entrants to the job market are bearing the brunt of the retreat to risk aversion. In other words, the college graduate class of 2025 is really unlucky.

The economist argued that the uncertainty causes companies to delay major decisions—including hiring—in the face of an unpredictable policy environment.

“This risk aversion is particularly damaging for those at the start of their careers, who rely on a steady flow of entry-level openings to get a foot in the door,” he wrote.

DeLong has sounded similar warnings of a slowdown for years. He talked to Fortune in 2022 about his theory of the economy starting to sputter from his book Slouching Towards Utopia. In 2025, he wrote, the big story in the jobs market is not actually AI, but something different.

Policy paralysis

So, what’s really keeping freshly minted graduates from clinching that all-important first job? DeLong cited Bloomberg BusinessWeek’s Amanda Mull and her theory about “stochastic uncertainty”—a cocktail of unpredictability around government policies, trade, immigration, and inflation. Companies aren’t firing; instead, they’re just waiting. And many are delaying new hires in anticipation of possible sudden shifts in tariffs, inflation rates, and regulatory environments. The result is a wait-and-see climate where employers, worried about future economic shocks, have selected caution over expansion. The holding pattern hits new entrants to the workforce especially hard.

While overall unemployment in the U.S. remains low, the situation is uniquely difficult for new graduates relative to the rest of the workforce. Citing economists including Paul Krugman, DeLong noted that while the absolute unemployment rate for college graduates isn’t alarming, the gap between graduate unemployment and general unemployment rates is at record highs. In the past, higher education reliably led to lower unemployment, but now recent grads are struggling “by a large margin” compared to previous generations.

As previously reported by Fortune Intelligence, Goldman Sachs has argued that the college degree “safety premium” is mostly gone. The team, led by Goldman’s chief economist Jan Hatzius, wrote: “Recent data suggests that the labor market for recent college graduates has weakened at a time when the broader labor market has appeared healthy.”

It also found that since 1997, young workers without a college degree have become much less likely to even look for work, with their participation rate dropping by seven percentage points.

Goldman Sachs

Mull cited an analysis by the Federal Reserve Bank of New York which found that tech and design fields, including computer science, computer engineering, and graphic design, are seeing unemployment rates above 7% for new graduates.

Why the AI hype misses the mark

Although the tech sector is buzzing about AI’s potential to replace junior analysts or automate entry-level tasks, DeLong urged caution in assigning blame. In his typical style, he noted, “there is still [no] hard and not even a semi-convincing soft narrative that ‘AI is to blame’ for entry-level job scarcity.” Hiring slowdowns, he pointed out, are driven by broader economic forces: uncertainty, risk aversion, and changes in how companies invest.

Here again, DeLong’s analysis rhymes and aligns with recent research from Goldman’s Hatzius. The bank’s quarterly “AI Adoption Tracker,” issued in July, found that the unemployment rate for AI-exposed occupations had reconciled with the wider economy, which contradicts fears of mass displacement. They also noted there have been no recent layoff announcements explicitly citing AI as the cause, underscoring that it’s contained to disruption of specific functions, not entire industries.

Goldman Sachs

Crucially, he argued, rather than hiring people, companies in the tech sector are splurging on “the hardware that powers artificial intelligence”—notably Nvidia’s high-performance chips—fueling a boom in capital investment while sidelining junior hires.

“For firms, the calculus is straightforward: Investing in AI infrastructure is seen as a ticket to future competitiveness, while hiring junior staff is a cost that can be postponed.”

Underpinning these trends is a shift away from any and all risk. Employers prefer to hire for specific short-term needs and are less willing to invest in developing new talent—leaving young applicants caught in a cycle where “just getting your foot in the door” is more difficult than ever. Incumbent workers, worried about job market uncertainty, are less likely to change jobs, leading to fewer openings and greater stagnation.

DeLong’s analysis harmonized with Goldman Sachs’ findings about the declining premium attached with a college degree:

“For the longer-run, the rise in the college wage premium is over, and a decline has (probably) begun.”

For decades, he continued, a college degree was a ticket to higher earnings, and the labor market rewarded those with advanced skills and credentials. In recent years, though, “this has plateaued and may even be falling.” The causes are complex, he added, but the takeaway: While degrees remain valuable, they are no longer the ever-ascending ticket to prosperity they once were.

These comments confirm the gloomy remarks of University of Connecticut professor emeritus Peter Turchin, who recently talked with Fortune about the declining status of the upper middle class in 21st century America. When asked where else he sees this manifesting in modern life, Turchin said, “It’s actually everywhere you look.

“Look at the overproduction of university degrees,” he said, arguing that the decreasing premium that Goldman and DeLong write about shows up in declining rates of college enrollment and high rates of recent graduate unemployment. “There is overproduction of university degrees and the value of a university degree actually declines.”

DeLong’s bottom line for recent grads: Blame a risk-averse business climate, not technology, for today’s job woes. And now that we know the economy may have been much more risk-averse in 2025 than previously, DeLong’s warnings are worth revisiting.

DeLong did not respond to a request for comment.

For this story, Fortune used generative AI to help with an initial draft. An editor verified the accuracy of the information before publishing. 

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• President Trump erupted on social media after the Federal Reserve held interest rates steady this week. The president called on the board to “assume control” and lower interest rates on the same day a Biden-appointed Fed governor announced her resignation. Experts say Trump’s understanding of the interest rate decision is misguided and a revolt against Powell is unlikely.

Fed Governor Adriana Kugler announced Friday she is stepping down from her position earlier than expected, giving President Donald Trump the chance to expand his influence over the central bank as he calls for a revolt against Chairman Jerome Powell.

In a post on Truth Social before Kugler’s announcement, President Trump took a jab at Powell, saying he must “substantially” lower interest rates, after the Federal Open Market Committee voted overwhelmingly to keep rates unchanged.

“IF HE CONTINUES TO REFUSE, THE BOARD SHOULD ASSUME CONTROL, AND DO WHAT EVERYONE KNOWS HAS TO BE DONE,” Trump added in the post. 

Kugler said she would resign her position on Aug. 8, earlier than her expected departure in January when her term on the board of governors expires. She plans to return to Georgetown University as a professor this fall, according to a press release.

Kugler’s departure gives Trump a relished opportunity to nominate a voting member to the FOMC and expand his influence. The FOMC sets the federal funds rate that Trump has been saying needs to come down. The committee is made up of the seven governors who serve on the Fed board, the New York Fed president, and four rotating regional Federal Reserve bank presidents.

The FOMC meeting this week that kept rates unchanged between 4.25% and 4.5% saw the dissent of two Fed governors, Trump appointees Michelle Bowman and Christopher Waller. 

It marked a rare break in what’s a typically unanimous vote, but it was far from a mutiny, said Michael Ashley Schulman, the chief investment officer of Running Point Capital Advisors. 

Because interest rate decisions are decided by a simple majority vote by the FOMC’s 12 voting members, it’s possible Powell, who only gets one vote and no veto power, could be overridden. But it’s not likely, said Schulman. 

“A handful of dissents shows the committee can grumble, but a successful revolt would need at least seven ‘nays’ against Powell, an inside-the-Fed version of turning the Succession board on Logan Roy,” he told Fortune, referring to the TV show about a corporate power struggle. “Odds remain low unless the data roll over hard or new appointees tip the balance.”

Trump’s attacks on the Fed and Powell have escalated in his second term. And his constant insistence on lower rates and previous threats to appoint Powell’s successor, have put pressure on the Fed to exert its independence.

Yet, Powell still has ways he can fight back against Trump’s influence, if he chooses to, said Mark Spindel, senior adviser at F/m Investments and a co-author of The Myth of Independence: How Congress Governs the Federal Reserve. 

Powell has made clear he will serve out the remainder of his term as Fed chairman until it expires in May, yet Spindel notes Powell can also remain on the board of governors afterwards because his term on the board, which ends in 2028, is independent of his four-year term as chairman.

“Powell sticking around for a while after his chairmanship would be a scenario by which he could keep the president from attaining a majority of the board of governors, preventing all sorts of weird dynamics, and making communication by the incoming chair more difficult,” Spindel told Fortune.

Powell has repeatedly declined to say whether he intends to stay on as Fed governor after his term as chairman ends.

It’s also unclear how Trump will react if the Fed cuts rates. The economy has been largely resilient in spite of uncertainty caused in part by the threat of tariffs on major U.S. trading partners, but cracks have started to emerge. The U.S. economy added only about 73,000 jobs last month, and gains in June and May were revised down sharply, according to the Bureau of Labor Statistics. 

The new numbers were so stunning they upended the earlier narrative that the labor market was remarkably shock proof, which has colored the Fed’s stance on rates. 

In the press conference following the Fed’s decision to keep rates unchanged, Powell hesitated to guide toward a rate in the coming months. He struck a hawkish tone, according to a note by Bank of America’s macroeconomics team, putting a damper on investor hopes that the FOMC’s next meeting in September could bring a rate cut.

“It seems to me — and to almost the whole committee — that the economy is not performing as though restrictive policy is holding it back inappropriately,” Powell said.

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A surprisingly weak July employment report has intensified expectations that the Federal Reserve will resume cutting interest rates as soon as September, with mounting evidence of a slowing U.S. economy and faltering labor market offsetting persistent inflation worries driven by new tariff hikes.

The Federal Open Market Committee (FOMC) had previously left rates unchanged at a range of 4.25% to 4.50% at its July meeting, despite internal disagreements, growing signs that economic conditions warranted a more dovish approach, and mounting pressure from President Donald Trump on Fed Chair Jerome Powell to cut. The July jobs report, of course, is changing the picture rapidly.

The Labor Department reported a gain of just 73,000 nonfarm payroll jobs in July, well below consensus forecasts. More troubling were the significant downward revisions for May and June, which cut a combined 258,000 jobs from the previous estimates and reduced those months’ average gains to less than 20,000 jobs per month. While July’s number alone would not spell crisis, the back-to-back weakness and hefty revisions roused investor concerns about potential cracks forming in the U.S. labor market. Powell has repeatedly emphasized the balance between labor supply and demand, and said the unemployment rate is the “key indicator to watch.” July’s unemployment rate ticked up to 4.2%, just shy of a 12-month high, providing further evidence of softening conditions.

Market reaction was swift. Stephen Brown, Deputy Chief North America Economist for research firm Capital Economics, called it a “payrolls shocker.” He noted an immediate change in markets, which repriced the likelihood of a September rate cut at 85%, a jump from below 50% prior to the jobs data, as futures traders bet that the Federal Open Market Committee will need to respond to mounting evidence of economic softening.

“The July jobs report goes a long way toward providing the evidence of a weaker labor market that the Fed needs to justify cutting interest rates in the face of above-target inflation,” said Brian Rose, senior U.S. Economist at UBS Global Wealth Management, in a statement to Fortune Intelligence. Rose noted that GDP data had shown the economy’s growth slowing to an annualized 1.2% pace in the first half of 2025, well below the longer-term trend rate of 2.0%. “We expect soft data in the second half of 2025 as well. This should help to offset some of the inflationary pressure driven by tariff hikes,” he added.

Other recent data reinforce the picture of an economy under strain. Survey indicators such as the ISM manufacturing employment index fell further in July, while measures of business capital spending have only recovered modestly after disruptions following April’s “Liberation Day.” Meanwhile, President Trump’s new tariff measures have pushed up import costs, adding to the inflation outlook.

Fiendishly mixed signals

The July payroll dip, coming on the heels of the disruptive “Liberation Day” in April, may not yet herald a deeper jobs slide, other data suggests. Brown noted that initial jobless claims ticked down to 218,000 last week, and continuing claims have declined steadily since peaking in early June.

Analysts expect Powell to use the upcoming Jackson Hole Economic Symposium, to be held August 21–23, as an opportunity to signal the central bank’s readiness to act if labor market weakness persists and larger inflation effects from tariffs do not materialize.

Rose’s baseline scenario now sees the Fed resuming rate cuts at its September meeting and continuing to cut by 25 basis points each meeting through January, trimming the federal funds rate by a full percentage point to bring borrowing costs back to a “roughly neutral” level.

“Given this morning’s data, Powell may be willing to drop a hint that the Fed is leaning toward a September cut,” Rose said.

For this story, Fortune used generative AI to help with an initial draft. An editor verified the accuracy of the information before publishing. 

This story was originally featured on Fortune.com

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• Stocks fell in after a weak jobs report and the rollout of Trump’s new tariff rates. July’s figures fell short of expectations, and the Labor Department drastically reduced the number of new jobs for June and May. Trump, meanwhile, made last-minute changes to tariff rates ahead of his self-imposed deadline.

More last-minute modifications to tariff rates and a disappointing July jobs report weighed heavily on investors on Friday.

At the close of trading, the Dow Jones Industrial Average tumbled 542 points (-1.23%). The Nasdaq sank 2.24%, and the S&P 500 plunged -1.6%.

Nonfarm payrolls were up by 73,000 last month, which was far less than the 100,000 economists were expecting. In addition, the Labor Department revised previous months downward, saying June job growth, which was previously reported at 147,000, was actually just 14,000. May’s count was also changed from 144,000 to 19,000.

That indicated the job market has been weak for quite a while now, something many Americans suspected, despite the bullish jobs numbers. The only possible bright side to that is it could give the Federal Reserve a reason to cut interest rates sooner than expected.

“Today’s data signals labor market conditions continue to cool and while the softer conditions don’t warrant a warning signal for investors, it should put market participants including the Fed on notice that economic conditions are shifting,” said Charlie Ripley, senior investment strategist for Allianz Investment Management.

Before the jobs report came out, tariffs weighed on stocks, though. Overnight, Trump updated the levies, which now range from 10% to 41%. Even goods that were transshipped to avoid the tariffs will face a 40% tariff now. And Canada will now have a 35% levy, up from 25%.

Macquarie strategists Thierry Wizman and Gareth Berry, in a note to investors, wrote trading at the start of the month was beginning “with a bit of panic.”

Amidst all this, Trump resumed his public criticisms of Fed chair Jerome Powell, seemingly encouraging the Fed Board to launch a coup.

“Jerome ‘Too Late’ Powell, a stubborn MORON, must substantially lower interest rates, NOW,” Trump wrote. “IF HE CONTINUES TO REFUSE, THE BOARD SHOULD ASSUME CONTROL, AND DO WHAT EVERYONE KNOWS HAS TO BE DONE!”

The weak market open comes after three consecutive days of losses for the S&P 500. So far this year, the S&P 500 has increased 6.6%. The Dow is up 2.45% and the Nasdaq has rallied 6.9%.

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• U.S. payrolls grew by just 73,000 last month, well below forecasts, but downward revisions to prior months stunned Wall Street even more, showing that the labor market was much weaker over the spring. That may prompt the Federal Reserve to lower rates sooner rather than later, which President Donald Trump has been demanding for months.

The U.S. labor market looks much weaker than previously thought, and Wall Street now expects the Federal Reserve to resume rate cuts sooner rather than later.

The Labor Department reported Friday that payrolls grew by just 73,000 last month, well below forecasts for about 100,000.

But downward revisions for prior months shocked investors even more, revealing that the labor market came to a near standstill over the spring. May’s tally was cut from 144,000 to 19,000, and June’s total was slashed from 147,000 to just 14,000, resulting in a combined cut of 258,000. The average gain over the past three months is now only 35,000.

The massive revisions prompted President Donald Trump to fire the head of the federal agency that puts out the payroll data, Erika McEntarfer, commissioner of the Bureau of Labor Statistics. The data reprint was so bad that Eric Pachman, chief analytics officer at Bancreek Capital Advisors, noted that while July’s 73,000 looks comparatively like good news, “how can we even trust this number now?”

The jobs report came just days after the Fed kept rates steady again, with Chair Jerome Powell signaling a continued desire to wait for more data to see how President Donald Trump’s tariffs would impact inflation, which is still running above the central bank’s 2% target.

“Powell is going to regret holding rates steady this week,” Jamie Cox, managing partner at Harris Financial Group, said in a note. “September is a lock for a rate cut, and it might even be a 50-basis-point move to make up the lost time.”

The unemployment rate also edged up to 4.2% from 4.1%, even as the labor force shrank. Meanwhile, U.S. factories continued to slump and cut 11,000 jobs last month after shedding 15,000 in June and 11,000 in May amid uncertainty over Trump’s trade war.

Stocks plummeted on the jobs data, with the S&P 500 down 1.6% and the Nasdaq down 2.2%. The 10-year Treasury yield sank more than 15 basis points to 4.208% as Wall Street priced in a rate cut at the Fed’s meeting next month and more later in the year. The yield on the two-year Treasury, which is more sensitive to Fed rates, plunged almost 27 basis points.

Markets were slumping before the jobs data as Trump announced fresh tariff rates on U.S. trading partners, with some higher than before, as well as an additional 40% duty for all transshipped goods.

After the jobs report, Trump reiterated his monthslong demand for the Fed to lower rates, while Cleveland Fed President Beth Hammack stood by the central bank’s decision on Wednesday to keep policy steady.

Still, Wall Street noted that the revisions put the labor market in a starkly different light, after it looked remarkably resilient since Trump launched his trade war.

“Headline NFP [nonfarm payroll] at 73K is a miss, but perhaps more concerning is –258K net revisions to the prior two months. These revisions put May’s headline NFP at 19K and June’s at 14K,” Adam Hetts, global head of multi-asset and portfolio manager at Janus Henderson Investors, said in a note. “Had those figures been the initial prints a month or two ago it would have significantly changed the labor market narrative over the entire summer. Indeed, odds of a September rate cut are increasing significantly on the back of this data release.”

Labor supply vs. demand

Other analysts noted that other details don’t suggest there’s a total collapse in employment. The unemployment rate hasn’t changed much for a while. Wages are still growing at a healthy clip, putting more money in consumers’ wallets.

Meanwhile, weekly job claims data has been steady overall, too, meaning there hasn’t been a widespread surge in layoffs.

A critical question is whether the muted job gains are the result of slow labor supply or slow demand. Supply has taken a big hit since Trump launched his immigration crackdown, and Friday’s payroll report showed that the number of foreign-born workers in the labor force has shrunk by 1.2 million in the past six months.

As a result, even a tepid uptick in hiring will barely move the needle on the jobless rate. In fact, Powell suggested on Wednesday that the unemployment rate merits closer attention than the payroll number since less demand is needed to offset supply.

Whether supply or demand is the culprit has major implications for the Fed, according to Preston Caldwell, chief U.S. economist at Morningstar.

“The Fed has no reason to loosen monetary policy in response to a decline in job growth driven by labor supply—as such a decline is neither deflationary nor does it create a gap with respect to maximum sustainable employment,” he wrote in a note. “On the other hand, the speed of the deceleration in job growth, along with uncertainty about what exactly the data means, should be alarming to the Fed, and argues strongly for a September cut as a prophylactic measure at the least.”

But Bill Adams, chief economist for Comerica Bank, noted that Trump’s tariffs are still putting upward pressure on inflation, making it less clear-cut that the Fed will ease policy soon.

He also pointed to labor supply, specifically that the overall labor force has fallen for three consecutive months. Fed policymakers will see another jobs report before their September meeting.

“If it shows labor supply declined again and held the unemployment rate steady while tariffs push up inflation, the Fed is likely to hold interest rates steady again,” Adams wrote in a note.

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President Donald Trump on Friday called for the Federal Reserve’s board of governors to usurp the power of Fed Chair Jerome Powell, criticizing the head of the U.S. central bank for not cutting short-term interest rates.

Posting on his Truth Social platform, Trump called Powell “stubborn.” The Fed chair has been subjected to vicious verbal attacks by the Republican president over several months.

The Fed has the responsibility of stabilizing prices and maximizing employment. Powell has held its benchmark rate for overnight loans constant this year, saying that Fed officials needed to see what impact Trump’s massive tariffs had on inflation.

If Powell doesn’t “substantially” lower rates, Trump said, “THE BOARD SHOULD ASSUME CONTROL, AND DO WHAT EVERYONE KNOWS HAS TO BE DONE!”

Trump sees the rate cuts as leading to stronger growth and lower debt servicing costs for the federal government and homebuyers. The president argues there is virtually no inflation, even though the Fed’s preferred measure is running at an annual rate of 2.6%, slightly higher than the Fed’s 2% target.

Trump has called for slashing the Fed’s benchmark rate by 3 percentage points, bringing it down dramatically from its current average of 4.33%. The risk is that a rate cut that large could cause more money to come into the economy than can be absorbed, possibly causing inflation to accelerate.

The Supreme Court suggested in a May ruling that Trump could not remove Powell for policy disagreements. This led the White House to investigate whether the Fed chair could be fired for cause because of the cost overruns in its $2.5 billion renovation projects.

Powell’s term as chair ends in May 2026, at which point Trump can put his Senate-confirmed pick in the seat.

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President Donald Trump has raised the tariff rate on U.S. imports from Canada to 35% from 25%, effective Friday.

The announcement from the White House late Thursday said Canada had failed to “do more to arrest, seize, detain or otherwise intercept … traffickers, criminals at large, and illicit drugs.”

Trump has heckled Canada for months and suggested it should become its 51st U.S. state. He had threatened to impose the higher tariff on Canada if no deal was reached by Friday, his deadline for reaching trade agreements with dozens of countries.

Earlier Thursday, the president said Canada’s announcement it will recognize a Palestinian state would “make it very hard” for the United States to reach a trade agreement with its northern neighbor. Trump has also expressed frustration with a trade deficit with Canada that largely reflects oil purchases by America.

Prime Minister Mark Carney had tempered expectations over tariffs, saying Ottawa would only agree to a deal “if there’s one on the table that is in the best interests of Canadians.”

In a statement released early Friday, he said he was disappointed by Trump’s actions and vowed to diversify Canada’s exports.

“Canada accounts for only 1% of U.S. fentanyl imports and has been working intensively to further reduce these volumes,” he said, pointing to heavy investments in border security.

Carney added that some industries — including lumber, steel, aluminum and automobiles — will be harder hit, but said his government will try to minimize the impact and protect Canadian jobs.

Canada was not included in Trump’s updated list of tariff rates on other countries announced late Thursday. Those import duties are due to take effect on Aug. 7.

Trump sent a letter to Canada a few weeks ago warning he planned to raise duties on many goods imported from Canada to 35%, deepening the rift between the two North American countries that has undermined their decades-old alliance.

Some imports from Canada are still protected by the 2020 United States-Mexico-Canada Agreement, or USMCA, which is up for renegotiation next year.

The White House’s statement said goods transshipped through Canada that are not covered by the USMCA would be subject to a 40% tariff rate. It did not say where the goods might originate.

President Donald Trump said Thursday that there would be a 90-day negotiating period with Mexico after a call with that country’s leader, Claudia Sheinbaum, keeping 25% tariff rates in place.

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• Jamie Dimon backed Fed Chair Jerome Powell’s decision to hold rates steady, despite criticism from President Trump. The JPMorgan Chase CEO also warned the Fed’s independence has historically led to lower rates, thus suggesting that political interference could drive rates up. Dimon echoed Powell’s caution, saying it’s too early to judge the full impact of tariffs on the FOMC’s mandate.

JPMorgan Chase CEO Jamie Dimon has doubled down on his support for Fed chairman Jerome Powell—despite criticism from the Oval Office of the Fed’s current stance.

This week the Federal Open Market Committee (FOMC), led by Powell, confirmed expectations that they would not be reducing the base rate from its current level of 4.25% to 4.5%.

Despite the fact the president has called Powell “hard headed” and “dumb” for maintaining such levels, Dimon publicly backed the Fed chief.

He also suggested that political intervention into the Fed—which is how some spectators have viewed Trump’s rhetoric—would actually work against Trump’s wishes for a reduction.

Speaking to CNBC yesterday, Dimon said: “I have never seen a president ever say they want higher interest rates … so I’m not going to agree with all that language, but I think Jay Powell is a professional. I think independence is important. I think actually independence keeps interest rates lower, if you actually look through the history of interest rates a little bit.

“Just lowering short-term rates doesn’t necessarily have the effect you want on 10-year rates and we should be a little cautious. The president gets a chance to pick a new Fed chair in like eight months from now.

“I think they’re kind of doing the right thing. The economy’s been chugging along. We have been in that soft landing now for four or five years. Inflation still hasn’t hit 2%, it’s 2.5 or 2.7, however you look at it. And I think if inflation comes down and the economy continues to do well, they will probably reduce rates shortly.”

In May the Wall Street veteran said: “There’s always a notion that somehow the Fed is omnipotent and can do whatever it wants. And they do set short-term rates, but they also have to follow the facts. So they raise rates because inflation went up, and they can’t control it even today.”

The market consensus is indeed that Powell will cut later this year. Many believe that rate cut will come at the FOMC’s next meeting in September, following the Jackson Hole Symposium in August which has historically been a time used to discuss big policy changes.

That being said, Powell struck a far more hawkish tone in his post-meeting press conference this week, surprising analysts with the suggestion that if the Fed wasn’t “looking through” tariff inflation—which critics have claimed he is not—a raise of the base rate could have been on the cards.

Dimon would also ‘wait and see’

The general tone of Powell’s messaging this year has been to “wait and see.” This cautious attitude earned Powell the nickname of “Too Late” from Trump.

Dimon’s comments come after the ‘White Knight of Wall Street’ reportedly met with the president last week to discuss the economy.

Relations between the two began warming after Trump shared a clip of a clip of Dimon’s interview with Fox News on his social media account, Truth Social, earlier this year. The post not only showed the president had watched the interview, but also appreciated the backing from the CEO of America’s largest bank.

But on Fed policy, Dimon is on the side of Powell, saying: “When you look at it … there are a lot of forces at work in the economy, and tariffs are one of them. The remilitarization of the world, the fiscal deficits, the demographics, all those things are going to drive various things. And, yes, they may drive slightly higher inflation.

“What you really want is more growth. That is far more important than whether inflation ticks up or down a little bit.”

With President Trump in the last 24 hours announcing a new swathe of tariffs on countries which haven’t yet agreed deals—Brazil will be facing a 50% hike, Canada 35% for example—the sands are still shifting beneath the feet of the Fed.

Dimon added that while the effect of tariffs so far has been “quite moderated” there may yet be “some effect” from cost increases being handed back to consumers. He explained: “It’s also quite clear some is being passed on and some is not. And we just don’t know yet. And you may see more effect down the road. We will have to wait and see.”

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• Global stocks are sliding after President Trump’s new tariff announcement, with S&P 500 futures down nearly 1% and major indices falling worldwide. Analysts warn the true impact of these tariffs will hit the U.S. economy in the coming months through higher costs for companies and consumers. Import taxes are now at their highest levels since the 1930s.

S&P 500 futures are down nearly 1% this morning, prior to the opening bell, and stocks across the globe are tumbling too as investors digest Day 1 of President Trump’s latest tariff regime.

That’s only the short-term reaction. The real effects of tariffs won’t arrive in the U.S. for months, analysts are warning.

Although today’s selloff is negative, it’s also muted, according to Deutsche Bank. “The U.S. tariff rate has risen to about 15% from a little over 2% at the start of the year. That’s their highest level since the 1930s but that has not prevented U.S. equities from being near their all-time highs and other markets being much stronger this year,” Jim Reid and his team told clients this morning.

(Elsewhere, South Korea’s KOSPI fell an astonishing 3.9% today but most of that was because of a new set of taxes on companies and investors announced by the government there. “As you can imagine the proposals are not proving popular amongst market participants,” Reid wrote.)

Nonetheless, analysts are gloomy this morning. Even the good news is being greeted with disdain.

For instance, Apple delivered a stellar Q2 earnings call last night. “Apple surprised investors with results that defied seasonal trends and marked a significant acceleration in total company revenue growth,” JPMorgan’s Samik Chatterjee told clients. Although the stock was briefly up 2% in overnight trading it is down 17% year-to-date.

Why? Tariffs, for one reason. CEO Tim Cook told investors the tariffs were expected to cost the company $1.1 billion in the upcoming quarter. Tariffs—among other issues—have wiped $700 billion off Apple’s market cap this year.

“Psychologically [Trump’s new import tax regime]  just needles the investors with their greatest fears: that it’s going to slow growth,” Gene Munster, managing partner at Deepwater Asset Management, told the Financial Times.

That’s the main issue on Wall Street: These extra tariff costs are now baked in and will show up, finally, in the real world in the coming months and through 2026.

“Japanese data indicate that U.S. tariffs have had an overall negative effect on exports,” ING’s Min Joo Kang said this morning. “Japanese exporters appeared to have offset some tariff impacts by reducing prices. But they may eventually pass costs on to consumers, potentially causing delayed price pressures in the U.S.”

UBS’s Paul Donovan put it this way: “The global economy is reverberating with the dull thud of the yoke of taxation dropping onto the shoulders of U.S. consumers. These taxes do not show up in consumer baskets with full force until January next year.”

There are two other downside risks to keep an eye on.

Firstly, today we get the latest jobs number (nonfarm payrolls). The consensus expectation is 105,000 jobs were added but that would be below the three-month average of 150,000, according to Ronnie Walker and Jessica Rindels at Goldman Sachs.

Secondly, personal consumption expenditures are weakening, according to Pantheon Macroeconomics’ Samuel Tombs and Oliver Allen. “Spending already has slowed sharply since last year, with the level of expenditure in June no higher than in December. We expect spending to remain stagnant over the rest of this year, as real incomes tread water amid a softening labor market and burst of goods inflation,” they said.

No prizes for guessing where that “goods inflation” is coming from. 

Here’s a snapshot of the action prior to the opening bell in New York:

• S&P 500 futures were down 1% this morning, premarket, after the index closed down 0.37% yesterday. 
• STOXX Europe 600 was down 1.21% in early trading. 
• The U.K.’s FTSE 100 was down 0.55% in early trading.
• Japan’s Nikkei 225 was down 0.66%. 
• China’s CSI 300 was down 0.51%. 
• The South Korea KOSPI was down 3.88%. 
• India’s Nifty 50 was down 0.5%. 
• Bitcoin fell to $114K.

This story was originally featured on Fortune.com

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With President Donald Trump’s dramatic tariff hikes on the cusp of starting, countries around the world scrambled on Thursday to finalize their trade frameworks with the United States, figure out the tax rates their goods might face and prepare for the unknown.

Shortly before Friday deadline for the tariffs beginning, Trump said he would enter into a 90-day negotiating period with Mexico, one of the nation’s largest trading partners, with the current 25% tariff rates staying in place, down from the 30% he had threatened earlier.

“We avoided the tariff increase announced for tomorrow and we got 90 days to build a long-term agreement through dialogue,” Mexican leader Claudia Sheinbaum wrote on X after a call with Trump that he referred to as “very successful” in terms of the leaders getting to know each other better.

White House press secretary Karoline Leavitt said at Thursday’s news briefing that Trump “at some point this afternoon or later this evening” would sign an order to impose new rates starting at 12:01 a.m. EDT Friday. Countries that had not received a prior letter from Trump or negotiated a framework would be notified of their likely tariff rates, either by letter or executive order, she said.

The unknowns created a sense of drama that have defined Trump’s rollout of tariffs over several months, with the one consistency being his desire to levy the import taxes that most economists say will ultimately be borne to some degree by U.S. consumers and businesses.

“We have made a few deals today that are excellent deals for the country,” Trump told reporters on Thursday afternoon without detailing the terms of those agreements or nations involved.

Trump said that Canadian Prime Minister Mark Carney had called ahead of 35% tariffs being imposed on many of his nation’s goods, but “we haven’t spoken to Canada today.”

Trump imposed the Friday deadline after his previous “Liberation Day” tariffs in April resulted in a stock market panic. His unusually high tariff rates unveiled in April led to recession fears, prompting Trump to impose a 90-day negotiating period. When he was unable to create enough trade deals with other countries, he extended the timeline and sent out letters to world leaders that simply listed rates, prompting a slew of hasty deals.

Trump reached a deal with South Korea on Wednesday, and earlier with the European Union, Japan, Indonesia and the Philippines. His commerce secretary, Howard Lutnick, said on Fox News Channel’s “Hannity” that there were agreements with Cambodia and Thailand after they had agreed to a ceasefire to their border conflict.

Among those uncertain about their trade status were wealthy Switzerland and Norway.

Norwegian Finance Minister Jens Stoltenberg said it was “completely uncertain” whether a deal would be completed before Trump’s deadline.

But even the public announcement of a deal can offer scant reassurance for an American trading partner.

EU officials are waiting to complete a crucial document outlining how the framework to tax imported autos and other goods from the 27-member state bloc would operate. Trump had announced a deal Sunday while he was in Scotland.

“The U.S. has made these commitments. Now it’s up to the U.S. to implement them. The ball is in their court,” EU Commission spokesperson Olof Gill said. The document would not be legally binding.

Trump said as part of the agreement with Mexico that goods imported into the U.S. would continue to face a 25% tariff that he has ostensibly linked to fentanyl trafficking. He said autos would face a 25% tariff, while copper, aluminum and steel would be taxed at 50% during the negotiating period.

He said Mexico would end its “Non Tariff Trade Barriers,” but he didn’t provide specifics.

Some goods continue to be protected from the tariffs by the 2020 U.S.-Mexico-Canada Agreement, or USMCA, which Trump negotiated during his first term.

But Trump appeared to have soured on that deal, which is up for renegotiation next year. One of his first significant moves as president was to tariff goods from both Mexico and Canada earlier this year.

U.S. Census Bureau figures show that the U.S. ran a $171.5 billion trade imbalance with Mexico last year. That means the U.S. bought more goods from Mexico than it sold to the country.

The imbalance with Mexico has grown in the aftermath of the USMCA as it was only $63.3 billion in 2016, the year before Trump started his first term in office.

Besides addressing fentanyl trafficking, Trump has made it a goal to close the trade gap.

___

Associated Press writers Lorne Cook in Brussels and Jamey Keaten in Geneva contributed to this report.

This story was originally featured on Fortune.com

© Adrian Wyld/The Canadian Press via AP, File)

Numerous countries around the world are facing the prospect of much higher duties on their exports to the United States on Friday, a potential blow to the global economy, because they haven’t yet reached a trade deal with the Trump administration.

Some of the United States’ biggest trading partners have reached agreements, or at least the outlines of one, including the European Union, the United Kingdom, and Japan. Even so, those countries face much higher tariffs than were in effect before Trump took office. And other large trading partners — most notably China and Mexico — received an extension to keep negotiating and won’t be hit with new duties Friday, but they will likely end up paying more.

President Donald Trump intends the duties to bring back manufacturing to the United States, while also forcing other countries to reduce their trade barriers to U.S. exports. Trump argues that foreign exporters will pay the cost of the tariffs, but so far economists have found that most are being paid by U.S. companies. And measures of U.S. inflation have started to tick higher as prices of imported goods, such as furniture, appliances, and toys rise.

For those countries without an agreement, they could face duties of as much as 50%, including on large economies such as Brazil, Canada, Taiwan, and India. Many smaller countries are also on track to pay more, including South Africa, Sri Lanka, Bangladesh, and even tiny Lesotho.

The duties originated from Trump’s April 2 “Liberation Day” announcement that the United States would impose import taxes of up to 50% on nearly 60 countries and economies, including the 27-nation European Union. Those duties, originally scheduled for April 9, were then postponed twice, first to July 9 and then Aug. 1.

Will the deadline hold this time?

As of Thursday afternoon, White House representatives — and Trump himself — insisted that no more delays were possible.

White House press secretary Karoline Leavitt said Thursday that Trump “at some point this afternoon or later this evening” will sign an order to impose new tariff rates starting midnight on Friday.

Countries that have not received a prior letter on tariffs from Trump or negotiated a trade framework will be notified of their likely tariff rates, Leavitt said, either in the form of a letter or Trump’s executive order. At least two dozen countries were sent letters setting out their tariff rates.

On Wednesday, Trump said on his social media platform Truth Social, “THE AUGUST FIRST DEADLINE IS THE AUGUST FIRST DEADLINE — IT STANDS STRONG, AND WILL NOT BE EXTENDED.”

Which countries have a trade agreement?

In a flurry of last minute deal-making, the Trump has been announcing agreements as late as Thursday, but they are largely short on details.

On Thursday, the U.S. and Pakistan reached a trade agreement expected to allow Washington to help develop Pakistan’s largely untapped oil reserves and lower tariffs for the South Asian country.

And on Wednesday, Trump announced a deal with South Korea that would impose 15% tariffs on goods from that country. That is below the 25% duties that Trump threatened in April.

Agreements have also been reached with the European Union, Pakistan, Indonesia, Vietnam, the Philippines, and the United Kingdom. The agreement with the Philippines barely reduced the tariff it will pay, from 20% to 19%.

And which countries don’t?

The exact number of countries facing higher duties isn’t clear, but the majority of the 200 have not made deals. Trump has already slapped large duties on Brazil and India even before the deadline was reached.

In the case of Brazil, Trump signed an executive order late Wednesday imposing a 50% duty on imports, though he exempted several large categories, including aircraft, aluminum, and energy products. Trump is angry at Brazil’s government because it is prosecuting its former president, Jair Bolsonaro, for attempting to overturn his election loss in 2022. Trump was indicted on a similar charge in 2023.

While Trump has sought to justify the widespread tariffs as an effort to combat the United States’ chronic trade deficits, the U.S. actually has a trade surplus with Brazil — meaning it sells more goods and services to Brazil than it buys from that country.

Negotiations between the U.S. and Canada have been complicated by the Canadian government’s announcement that it will recognize a Palestinian state in September. Trump said early Thursday that the announcement “will make it very hard” for the U.S. to reach a trade deal with Canada.

Late Wednesday, Trump said that India would pay a 25% duty on all its exports, in part because it has continued to purchase oil from Russia.

On Thursday, the White House said it had extended the deadline to reach a deal with Mexico for another 90 days, citing the complexity of the trade relationship, which is governed by the trade agreement Trump reached when he updated NAFTA in his first term.

For smaller countries caught in Trump’s cross hairs, the Aug. 1 deadline is particularly difficult because the White House has acknowledged they aren’t able to negotiate with every country facing tariff threats. Lesotho, for example, a small country in southern Africa, was hit with a 50% duty on April 2, and even though it was postponed, the threat has already devastated its apparel industry, costing thousands of jobs.

“There’s 200 countries,’’ the president acknowledged earlier this month. “You can’t talk to all of them.’’

___

AP Writers Josh Boak and Wyatte Grantham-Philipps contributed to this report.

This story was originally featured on Fortune.com

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The tariffs planned by President Donald Trump on Friday touched off a feverish bout of activity among trade partners as key details remained unclear and nations didn’t know the taxes their goods could face — keeping an element of surprise to an event long hyped by the U.S. leader.

Just hours before the deadline, Trump on Thursday said he would enter a 90-day negotiating period with Mexico over trade as 25% tariff rates stay in place, providing a bit of clarity to a massive rewiring of the global economy that will require the president to sign a new executive order.

Trump posted on his Truth Social platform that his phone conversation with Mexican leader Claudia Sheinbaum was “very successful in that, more and more, we are getting to know and understand each other.”

The Republican president had threatened tariffs of 30% on goods from Mexico in a July letter, something that Sheinbaum said Mexico gets to stave off for the next three months.

“We avoided the tariff increase announced for tomorrow and we got 90 days to build a long-term agreement through dialogue,” Sheinbaum wrote on X.

The leaders’ morning call came at a moment of pressure and uncertainty for the world economy. As Trump’s deadline loomed, nations were scrambling to finalize the outlines of trade frameworks so he would not simply impose higher tariff rates that could upend economies and governments.

Trump reached a deal with South Korea on Wednesday, and earlier with the European Union, Japan, Indonesia and the Philippines. His commerce secretary, Howard Lutnick, said on Fox News Channel’s “Hannity” that there were agreements with Cambodia and Thailand after they had agreed to a ceasefire to their border conflict.

White House press secretary Karoline Leavitt said Trump “at some point this afternoon or later this evening” will sign an order to impose new rates starting at 12:01 a.m. EDT Friday. Countries that have not received a prior letter from Trump or negotiated a framework will be notified of their likely tariff rates, either by letter or executive order, she said.

Among those uncertain about their trade status were wealthy Switzerland and Norway.

Norwegian Finance Minister Jens Stoltenberg said it was “completely uncertain” whether a deal would be completed before Trump’s deadline.

But even the public announcement of a deal can offer scant reassurance for an American trading partner.

EU officials are waiting to complete a crucial document outlining how the framework to tax imported autos and other goods from the 27-member state bloc would operate. Trump had announced a deal Sunday while he was in Scotland.

“The U.S. has made these commitments. Now it’s up to the U.S. to implement them. The ball is in their court,” EU commission spokesman Olof Gill said. The document would not be legally binding.

Trump said as part of the agreement with Mexico that goods imported into the U.S. would continue to face a 25% tariff that he has ostensibly linked to fentanyl trafficking. He said autos would face a 25% tariff, while copper, aluminum and steel would be taxed at 50% during the negotiating period.

He said Mexico would end its “Non Tariff Trade Barriers,” but he didn’t provide specifics.

Some goods continue to be protected from the tariffs by the 2020 U.S.-Mexico-Canada Agreement, or USMCA, which Trump negotiated during his first term.

But Trump appeared to have soured on that deal, which is up for renegotiation next year. One of his first significant moves as president was to tariff goods from both Mexico and Canada earlier this year.

U.S. Census Bureau figures show that the U.S. ran a $171.5 billion trade imbalance with Mexico last year. That means the U.S. bought more goods from Mexico than it sold to the country.

The imbalance with Mexico has grown in the aftermath of the USMCA as it was only $63.3 billion in 2016, the year before Trump started his first term in office.

Besides addressing fentanyl trafficking, Trump has made it a goal to close the trade gap.

___

Associated Press writers Lorne Cook in Brussels and Jamey Keaten in Geneva contributed to this report.

This story was originally featured on Fortune.com

© AP Photo/Marco Ugarte, File

• Mortgage rates have remained stubbornly high: hovering near 7%, well above the sub-3% rates during the pandemic. That makes homeownership increasingly unaffordable for many Americans, as home prices have risen over 50% since 2020.

During the pandemic, home buyers got accustomed to sub-3% mortgage rates, which made purchasing a house feel more achievable. But in the past couple of years, buyers have had no such luck.

In late 2023, mortgage rates peaked at 8%. While they’ve let up some, today’s 30-year fixed mortgage rate is 6.75%, according to Mortgage News Daily. Economists and real-estate groups have warned they don’t see that figure budging much in the near future. And to make matters worse, some have said the mortgage rate it would take to make homes feel affordable again isn’t achievable. 

On Tuesday, Zillow economic analyst Anushna Prakash reported mortgage rates would need to drop to 4.43% for a typical home to be affordable to an average buyer. But “that kind of a rate decline is currently unrealistic,” Prakash wrote. Meanwhile, not even a 0% interest rate would make a typical home affordable in New York, Los Angeles, Miami, San Francisco, San Diego, or San Jose, she added. 

Warren Buffett’s Berkshire Hathaway HomeServices also said in an early July report that mortgage rates are one of the main deterrents for both home buyers and sellers.

“Many homeowners are reluctant [to] put their homes on the market and give up the low mortgage rates they already have,” according to Berkshire Hathaway HomeServices. “To them, high price gains won’t mitigate their ability to pay more for another home at significantly higher interest rates.”

This issue is also referred to as golden handcuffs—or the locked-in mortgage rate effect. The idea is that current homeowners have no incentive to put their homes on the market, even if they want to move, because they’d forgo a much lower mortgage rate they had locked in years ago. 

This causes a litany of other problems in the housing market, namely inventory.

The number of unsold existing homes for sale rose 9% month-over-month in April, according to Berkshire Hathaway HomeServices, to 1.45 million; that’s equal to 4.4 months’ supply on hand at the current sales pace and the highest level in five years. That’s shown itself in more sellers delisting their properties after sitting on the market for longer than expected.

“Homes are sitting on the market nearly three weeks longer than last year,” Realtor.com Senior Economist Jake Krimmel recently told Fortune. “That’s a sign of sellers still anchored to pandemic-era prices even though the market is telling them otherwise.” 

That doesn’t mean there’s an influx of housing in the U.S.; in fact, we’re still short millions of units. It just means there aren’t enough people who can actually afford to buy a home.

The factors influencing housing affordability

Although inventory levels are increasing, home prices and mortgage rates continue to be a roadblock for potential home buyers. Mortgage rates have remained “stubbornly high,” Berkshire Hathaway HomeServices said, deterring new buyers from the market.

According to a Realtor.com report published Thursday, the typical home spent 58 days on the market in July, which is 7 days longer than the same time last year. 

Mortgage rates are certainly a factor among buyers when deciding to make an offer, and home prices are also up more than 50% since the onset of the pandemic, according to the U.S. Case-Shiller Home Price Index.

All the while, wages haven’t grown at the same pace as home appreciation, making buying a house feel even more unaffordable. And if nothing changes like mortgage rates, inventory, or wage growth, it’s likely the housing affordability crisis in the U.S. will persist, Alexandra Gupta, a real-estate broker with The Corcoran Group, told Fortune.

“Some first-time buyers are turning to long-term renting or even co-living models because the idea of owning a home has become so out of reach. Others are relying more on family support to get into the market,” Gupta said. “We’re seeing a reshaping of the housing ladder.”

The small glimmer of hope, though, is home price growth appears to be slowing, according to the Case-Shiller indices.

“With affordability still stretched and inventory constrained, national home prices are holding steady, but barely,” Nicholas Godec, head of fixed-income tradables and commodities at S&P Dow Jones Indices, said in a statement.

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IBM Vice Chairman Gary Cohn, the former Director of the National Economic Council under President Trump, sounded a cautious note on the state of the U.S. economy in his July 30 interview with CNBC’s Money Movers, warning that despite upbeat surface indicators, troubling signs are brewing beneath the headline numbers.

Cohn’s assessment came in the aftermath of a surprisingly robust GDP report showing 3% growth, which he acknowledged looked positive on its face. He said if you take a “big, wide aperture snapshot of the economy, the headline looks really good,” before arguing that a deeper analysis, even a “half-step back,” reveals important red flags. Notably, he highlighted a 15% drop in investment and concerning labor market statistics, including a significant decline in voluntary quits—a traditional signal of worker confidence in the job market. Cohn cited the latest JOLTS report, which showed 280,000 jobs lost and 150,000 fewer voluntary quits, suggesting Americans are growing more cautious about leaving their jobs for better opportunities. “People quit their job when they believe the next job is better and higher-paying,” he said, calling that a “bold statement on individuals’ view on the economy.”

Who eats the tariffs and who drinks the coffee?

“A snapshot of the economy right now is, ‘we’re fine, we’re good,’” Cohn said, referencing both the strong labor market and inflation measures that have moderated closer to the Federal Reserve’s 2% target. In fact, he argued the Fed is fulfilling its dual mandate of full employment and price stability, as the jobs market looks close to full employment, in his view. However, he warned about softer data such as consumer sentiment and in specific segments of the economy. Cohn noted that several soft retail earnings, such as Starbucks, show that “consumers are not out there willfully spending money.”

One of the interview’s major themes was the effect of tariffs and trade uncertainty. Cohn, who famously resigned from the Trump White House in 2018, seemingly after internal disagreements over tariffs, argued that tariffs should be applied carefully and strategically. He has clarified in 2024 and onwards that he supports tariffs on products the U.S. also produces, such as electric vehicles, but warned that indiscriminate tariffs risk inflaming inflation, especially on goods the U.S. does not manufacture domestically. Cohn has been saying for months that tariffs are “highly regressive” and essentially function as a tax on all Americans, with a greater impact on poorer people.

Cohn told Money Movers on July 30 that initially, U.S. companies may absorb some tariff-related costs, but said this was unsustainable in the long term due to shareholder and debt obligations. Ultimately, he argued, “companies are going to pass these costs along” to the consumer, squeezing household budgets and creating “one-time price shocks” that erode purchasing power if wages do not rise accordingly. Host Sara Eisen pushed back, arguing corporate balance sheets are healthy, companies are incorporating AI to boost efficiency, and companies may not want to anger the Trump administration, which has famously instructed companies to “eat the tariffs.”

Cohn’s consistent warnings about tariffs through the years have not come to fruition so far, but he’s far from alone in seeing a massive hit coming—at some point—from tariffs. The entire economics establishment has warned about the delayed impact of tariffs for months; as of July, though, the Trump administration has collected $100 billion in tariff revenue with seemingly little impact on inflation. Fortune‘s Irina Ivanova reported on how economists explain that, ranging from “it’s too soon” to “consumers won’t stand for it.” At the same time, Trump is increasingly winning trade deals on favorable terms to the United States, such as the EU’s agreement to a 15% tariff, with carve-outs on pharmaceuticals and metals, while U.S. imports to the EU will be duty-free.

Cohn’s question remains: Who will ultimately eat the tariffs, and who will buy the coffee? The American consumer is waiting for the economic dust to settle.

IBM did not immediately respond to a request for comment.

For this story, Fortune used generative AI to help with an initial draft. An editor verified the accuracy of the information before publishing. 

This story was originally featured on Fortune.com

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Danish drugmaker Novo Nordisk, known for its blockbuster diabetes and weight-loss treatments Ozempic and Wegovy, on Tuesday lowered its full-year earnings forecasts again as it unveiled a new chief executive to tackle “recent market challenges”.

The company has faced growing headwinds in the key US pharmaceutical market, where the two drugs, known as GLP-1 injections, have seen their dominance challenged by rivals including Eli Lilly.

A rule by the US Food and Drug Administration allowing pharmacies to create so-called “compound” copycat versions of the drug after high demand led to shortages has also weighed on earnings, Novo said.

“Despite the expiry of the FDA grace period for mass compounding on May 22, 2025, Novo Nordisk market research shows that unsafe and unlawful mass compounding has continued,” it said in a statement.

It now expects full-year sales growth overall of eight to 14 percent, down from the 13 to 21 percent expected after a first forecast downgrade earlier this year.

Operating margins are seen reaching 10 to 16 percent, instead of the forecast of 16 to 24 percent.

The lower forecasts came as Novo reported Tuesday an 18 percent sales increase for the first half of the year, while operating profit growth fell to 29 percent after growth of 40 percent in the same period last year.

The “market challenges” prompted Novo to announce in May the departure of its chief executive Lars Fruergaard Jorgensen, who will be replaced by Maziar Mike Doustdar, currently its vice president for international operations.

“We are confident that he is the best person to lead Novo Nordisk through its next growth phase,” board chairman Helge Lund said in a statement.

“This is an important moment for Novo Nordisk,” Lund said. “The market is developing rapidly, and the company needs to address recent market challenges with speed and ambition.”

Novo Nordisk’s full first-half results will be published August 6.

This story was originally featured on Fortune.com

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By the time you read this article, there’s a chance that President Donald Trump will have changed his policy on tariffs yet again. Since his first day in office this term, Trump has been making plans to tax imported goods from other countries into the U.S., but with each passing day, his plans continue to change.

For example, the tariffs Trump has imposed on imports from China have jumped from 10% to 34%, then up to 104%, 125% and finally 145%, before dropping back down to 30%, all over the course of five months.

After announcing his plan for tariffs back in April—on a day he called “Liberation Day”—Trump put a 90-day delay on the upcoming tariffs in order to encourage other countries to make trade deals, or reciprocal tariff deals, with the U.S. The tariff pause is set to expire Aug. 1.

As Trump goes back and forth about tariffs, businesses across the world brace themselves for impact.

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• Markets in Europe and Asia are broadly up this morning with the exception of China, where stocks fell on news of an unexpected deterioration in manufacturing. S&P 500 futures are up nearly a full percentage point, premarket, suggesting that Wall Street very much liked Fed chair Jerome Powell’s rate-setting speech yesterday. The fly in the ointment? “Downside risks” to the labor market.

U.S. Federal Reserve Chairman delivered an entirely predictable press conference yesterday as he kept interest rates on hold at the 4.25% level and said he would await for more data before considering a possible move downward.

Markets liked it: Europe and Asia are broadly up this morning with the exception of China, where stocks fell on news of an unexpected deterioration in manufacturing. More importantly, S&P 500 futures are up nearly a full percentage point, premarket.

But there was one theme that Powell kept returning to, which isn’t so positive: “Downside risks” to the labor market. Powell referenced this phrase no fewer than six times in his press conference.

“We do see downside risk in the labor market,” he told reporters. “The labor market looks solid. Inflation is above target. And even if you look through the tariff effects, we think it’s still a bit above target. And that’s why our stance is where it is. But, as I mentioned, you know, downside risks to the labor market are certainly apparent.”

That’s actually a pretty good summation of what economists are seeing in the employment data right now. There is close to full employment, but the hiring market is sluggish and some of the good headline numbers are masked by one-off moves in government and education hiring.

Some analysts see U.S. employment getting weaker, not stronger, in the coming months.

“Chair Powell’s reading of the economic data was similar to ours—he highlighted the softer growth pace in the first half of the year, noted that the labor market remains solid but said six times that it faces ‘downside risks,’ and said that inflation is most of the way back to 2% and that a ‘reasonable base case’ is that tariffs will have only a one-time impact on the price level. This suggests that lowering rates soon could be reasonable but is not yet essential,” Goldman Sachs’ Jan Hatzius and his team told clients in a note this morning.

Lawrence Werther and Brendan Stuart at Daiwa Capital Markets noticed the same thing: “We found it interesting that he returned several times to the idea that officials are attentive to risks to the employment side of the dual mandate. He noted that unemployment remained low and that deceleration in hiring and growth of labor force participation suggest that the labor market is in balance, but we did read his comments as pointing to increased concern versus previous statements.” 

The jobs number (nonfarm payrolls, to give its technical name) is due out tomorrow. If it comes in weak, expect stocks to react strongly.

“Our forecast is for job growth to weaken in July and for the unemployment rate to tick higher. This will probably increase Federal Reserve concerns about the risks to the labor market, potentially throwing more support behind an earlier rate cut than is in our baseline,” Oxford Economics’ Nancy Vanden Houten told clients.

UBS’s Paul Donovan has a typically pithy observation on why it might be that U.S. companies are moving factories back to America but not actually creating jobs: The new factories are full of robots, not humans: “Several advanced economies, including the US and the UK, have experienced a boom in factory building in recent years. Increasing the size of factory buildings implies more manufacturing activity is taking place inside those buildings. [But] manufacturing employment is not increasing—this investment appears to represent capital for labor substitution,” he said.

Here’s a snapshot of the action prior to the opening bell in New York:

• S&P 500 futures were up 1% this morning, premarket, after the index closed down 0.12% yesterday. 
• STOXX Europe 600 was up 0.14% in early trading. 
• The U.K.’s FTSE 100 was up 0.52% in early trading. 
• Japan’s Nikkei 225 was up 1.02%. 
• China’s CSI 300 Index was down 1.82%. 
• The South Korea KOSPI was down 0.28%. 
• India’s Nifty 50 was up 0.08%. 
• Bitcoin is still above $118K.

This story was originally featured on Fortune.com

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• Fed Chair Jerome Powell held interest rates steady yesterday and signaled a cautious approach to cutting, despite growing dissent within the Fed and market hopes for a September move downward. While acknowledging tariff-driven inflation, Powell emphasized that more data is needed before adjusting policy.

In a move that everyone was expecting, U.S. Federal Reserve Chairman Jerome Powell disappointed Donald Trump again yesterday by refusing to cut the base interest rate.

Indeed, a hawkish Powell even used the dreaded r-word (“raise”)—having suggested he is responsive enough to calls to “look through” tariff-induced inflation by not increasing interest rates, a notion which likely would have sent the Oval Office into a fury.

While rates held steady at 4.25% to 4.5%, a split among the Federal Open Market Committee (FOMC) is growing, with two members dissenting. This represents the highest level of friction within the FOMC for more than 30 years.

But despite the pressure—both from within the Fed and externally—Powell struck a cautious tone on cutting. For some time analysts have pencilled in a cut in September, the next meeting of the FOMC.

“Higher tariffs have begun to show through more clearly to prices of some goods, but their overall effects on economic activity and inflation remain to be seen,” Powell told reporters in a news conference following the meeting. “A reasonable base case is that the effects on inflation could be short-lived—reflecting a one-time shift in the price level. But it is also possible that the inflationary effects could instead be more persistent, and that is a risk to be assessed and managed.”

To the point of a one-time price shift, Powell said the FOMC is heeding advice to not letting tariff-related inflation cloud the picture of the fundamentals of the economy.

But while investors had used this argument to lobby for a cut, Powell said the fact he is holding rate steady is evidence of this pragmatism, saying the FOMC is “a bit looking through goods inflation by not raising rates.”

Tabling a rate rise is quite the opposite of what many investors and economists are hoping for, but Powell doubled down: “The economy is not performing as though restrictive policy were holding it back inappropriately.” Investors, therefore, have been left wondering what it will take for the FOMC to cut.

“Fed Chair Powell was much more hawkish than we were expecting at his press conference,” Bank of America’s macroeconomics team wrote in a note seen by Fortune. “He was asked several questions on what it would take for the Fed to cut in September. In response, Powell made it clear that the onus is on the data to justify a September cut.“

They added: “To be clear, hikes are still very unlikely, but Powell argued that the ‘efficient’ way of balancing risks to the dual mandate is to stay on hold because cutting too early introduces the risk of having to raise rates again later.”

Markets were minded to agree with BofA on its take of a hawkish Powell. Equity markets fell following the announcement while treasury yields rose.

Elsewhere, UBS’s Paul Donovan said markets may be seeing through the FOMC dissenters, explaining in a note this morning: “Fed Chair Powell tried to present the two dissenting views as being rationally based, but investors are bound to suspect that the rationale amounted to little more than an excited jumping up and down and shouting ‘pick me, pick me’ in the general direction of the White House. The press conference gave a slightly hawkish tone in anticipating the trade tax inflation yet to come.”

Holding on for September

Despite Powell’s speech eroding some of the confidence in a September cut, analysts are tending to hold on to the hope that a cut will come at the next meeting the month after next.

The Fed chairman gave them some reason to hope, for example saying: “We are also attentive to risks on the employment side of our mandate.”

“The expectation for this meeting wasn’t a rate cut, and I don’t think there would have been much upside to Powell signaling that one was imminent,” wrote Elyse Ausenbaugh, Head of Investment Strategy at J.P. Morgan Wealth Managemen, adding: “The data, as it stands today, isn’t yet calling for one, and a lot could change between now and the FOMC’s next decision point in September.”

Likewise, Goldman Sachs’s chief U.S. economist David Mericle wrote in a note to clients seen by Fortune: “Neither [Powell’s] statement nor the press conference provided any direct hints about the likelihood of a cut in September. In response to a question about the two-cut baseline in the June dots, Powell acknowledged but declined to endorse it, saying that he would not want to substitute his own judgment for the views of other participants, especially with two more rounds of employment and inflation data still to come before the September meeting.”

That being said, Goldman continues to forecast three cuts in 2025: In September, October and December, followed by two more in 2026 to bring the rate down to 3% to 3.25%.

Mericle added: “Powell’s comments today suggest to us that a September cut is certainly still up for debate but not that labor market softening over the next two months is necessarily required, and we continue to see multiple paths to a cut.”

UBS’s global wealth management chief investment officer, Mark Haefele, is minded to agree with a September rate cut—citing the Job Openings and Labor Turnover Survey (JOLTS)revealing declines in both openings and hires, as well as a lower quits rate. 

The Conference Board’s consumer confidence survey also noted 18.9% of respondents felt jobs were hard to get in July, suggesting the alarms for labor market weakening may be beginning to chime.

Haefele wrote: “We continue to expect Fed to resume policy easing in September, cutting rates by 100 basis points over the next 12 months. Investors should consider medium-duration high grade and investment grade bonds for more durable portfolio income.”

This story was originally featured on Fortune.com

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• The Federal Reserve will hold interest rates steady, aligning with market expectations.
• Strong job growth and rising inflation likely influenced the Fed's decision to maintain rates.
• Two Fed governors dissented from the decision, preferring lower rates.

America's central bank is once again holding interest rates steady, although two Fed governors disagreed with the move in a rare departure from the committee's typical unanimity.

The Federal Open Market Committee announced Wednesday that it will not cut its benchmark rate, holding for the fifth time this year. It's a decision in line with forecasts: CME FedWatch, which anticipates interest-rate changes based on market moves, had projected a 96.9% chance of a hold in July. The Fed said in its July 30 statement that strong jobs numbers and a recent uptick in inflation contributed to the call.

Fed Governors Christopher Waller and Michelle W. Bowman dissented from the hold decision, saying they preferred a rate cut.

"What you want from everybody, and also from a dissenter, is a clear explanation of what you're thinking and what your argument is, and we had that today," Chair Jerome Powell said at the press conference. "It was a good meeting, and people really thought about this."

Powell added that "the majority of the committee" believes that current inflation and employment markers call for "moderately restrictive policy for now."

The chair said that the US is in a "solid position" economically, and the labor market is in balance. There's a slowing supply of jobs and demand for workers, contributing to a historically-low unemployment rate, he said. And, while Powell said the full impact of President Donald Trump's tariffs "remain to be seen," he said the price of many consumer goods are rising, which is a contrast from easing inflation on service prices.

"If we cut rates too soon, maybe we didn't finish the job with inflation. History is dotted with examples of that," Powell said. "And if we cut too late, maybe we're doing unnecessary damage to the labor market. We're trying to get that timing right."

Fed policy has gotten pushback from the Trump administration

While there's still time for the Fed's two penciled-in cuts in 2025, some economists and Trump administration leaders hoped for a change sooner rather than later. They've put the central bank — and Powell — in the hot seat.

President Donald Trump has consistently pushed for Powell to cut rates, writing in a July 8 Truth Social post that "'Too Late' Jerome Powell," "has been whining like a baby about non-existent Inflation for months, and refusing to do the right thing. CUT INTEREST RATES JEROME — NOW IS THE TIME!" Trump has also suggested removing and replacing Powell before the end of his tenure next year, though Wall Street leaders and top CEOs have warned that changing the Fed's leadership could have significant market consequences.

Trump's cabinet members have echoed his criticisms. Treasury Secretary Scott Bessent said in an interview last week that the Fed is "fear-mongering over tariffs," and "I think that what we need to do is examine the entire Federal Reserve institution and whether they have been successful." Commerce Secretary Howard Lutnick added that Powell is "doing the worst job" and "I don't know why he's torturing America this way. Our rates should be lower."

Waller, the dissenting Fed governor, also pushed for a rate cut ahead of Wednesday's meeting: "With inflation near target and the upside risks to inflation limited, we should not wait until the labor market deteriorates before we cut the policy rate."

The Fed's play to keep rates steady is a response to key indicators of economic health. The US labor market exceeded expectations by adding 147,000 jobs in June — due mostly to growth in the healthcare and hospitality sectors — and unemployment cooled to 4.1%. Consumer sentiment and retail spending are making a small recovery from early summer dips, and GDP rose more than expected this month. Inflation climbed to 2.7% in June from 2.4% in May, moving further from the Fed's 2% goal. Keeping rates unchanged is a strategy to curb further inflation while the Fed still sees positive momentum in the job market, Powell said.

Powell has also said that he's watching Trump's tariff agenda closely. The White House's next planned tariff deadline is August 1, which could place new levies on top trade partners. The president struck a deal with the European Union earlier this week, which sets a 15% tariff on most imported European goods, a reduction from Trump's planned 30% tariff.

The Fed chair emphasized at Wednesday's press conference that his top priorities are to promote maximum US employment and stable prices, regardless of politics and policy.

"The credibility of the Fed on price stability is very, very important. People believe that we will bring inflation down," he told Congress last month, adding, "That credibility once lost is very expensive to regain."

Going forward, Powell said he is thinking about the reliability of the economic data. These concerns come as the White House's DOGE office continues to cut staff and agency budgets across the federal government.

"The government data really is the gold standard in data," he said. "We need it to be good and to be able to rely on it. We're not going to able to substitute that. We'll have to make due what what we have, but I really hope we have what we need."

Federal Reserve Chair Jerome Powell gave little indication on Wednesday of bowing anytime soon to President Donald Trump’s frequent demands that he cut interest rates, even as signs of dissent emerged on the Fed’s governing board.

The Fed left its key short-term interest rate unchanged for the fifth time this year, at about 4.3%, as was expected. But Powell also signaled that it could take months for the Fed to determine whether Trump’s sweeping tariffs will push up inflation temporarily or lead to a more persistent bout of higher prices. His comments suggest that a rate cut in September, which had been expected by some economists and investors, is now less likely.

“We’ve learned that the process will probably be slower than expected,” Powell said. “We think we have a long way to go to really understand exactly how” the tariffs will affect inflation and the economy.

There were some signs of splits in the Fed’s ranks: Governors Christopher Waller and Michelle Bowman voted to reduce borrowing costs, while nine officials, including Powell, favored standing pat. It is the first time in more than three decades that two of the seven Washington-based governors have dissented. One official, Governor Adriana Kugler, was absent and didn’t vote.

The choice to hold off on a rate cut will almost certainly result in further conflict between the Fed and White House, as Trump has repeatedly demanded that the central bank reduce borrowing costs as part of his effort to assert control over one of the few remaining independent federal agencies.

Powell has in the past signaled during a news conference that a rate move might be on the table for an upcoming meeting, but he gave no such hints this time. The odds of a rate cut in September, according to futures pricing, fell from nearly 60% before the meeting to just 45% after the press conference, the equivalent of a coin flip, according to CME Fedwatch.

“We have made no decisions about September,” Powell said. The chair acknowledged that if the Fed cut its rate too soon, inflation could move higher, and if it cut too late, then the job market could suffer.

Major U.S. stock indexes, which had been trading slightly higher Wednesday, went negative after Powell’s comments.

“The markets seem to think that Powell pushed back on a September rate cut,” said Lauren Goodwin, chief market strategist at New York Life Investments.

Powell also underscored that the vast majority of the committee agreed with a basic framework: Inflation is still above the Fed’s target of 2%, while the job market is still mostly healthy, so the Fed should keep rates elevated. On Thursday, the government will release the latest reading of the Fed’s preferred inflation gauge, and it is expected to show that core prices, excluding energy and food, rose 2.7% from a year earlier.

Gus Faucher, chief economist at PNC Financial, says he expects the tariffs will only temporarily raise inflation, but that it will take most of the rest of this year for that to become apparent. He doesn’t expect the Fed to cut until December.

Trump argues that because the U.S. economy is doing well, rates should be lowered. But unlike a blue-chip company that usually pays lower rates than a troubled startup, it’s different for an entire economy. The Fed adjusts rates to either slow or speed growth, and would be more likely to keep them high if the economy is strong to prevent an inflationary outbreak.

Earlier Wednesday, the government said the economy expanded at a healthy 3% annual rate in the second quarter, though that figure followed a negative reading for the first three months of the year, when the economy shrank 0.5% at an annual rate. Most economists averaged the two figures to get a growth rate of about 1.2% for the first half of this year.

The dissents from Waller and Bowman likely reflect jockeying to replace Powell, whose term ends in May 2026. Waller in particular has been mentioned as a potential future Fed chair.

Michael Feroli, an economist at JPMorgan Chase, said in a note to clients this week if the pair were to dissent, “it would say more about auditioning for the Fed chair appointment than about economic conditions.”

Bowman, meanwhile, last dissented in September 2024, when the Fed cut its key rate by a half-point. She said she preferred a quarter point cut instead, and cited the fact that inflation was still above 2.5% as a reason for caution.

Waller said earlier this month that he favored cutting rates, but for very different reasons than Trump has cited: Waller thinks that growth and hiring are slowing, and that the Fed should reduce borrowing costs to forestall a rise in unemployment.

There are other camps on the Fed’s 19-member rate-setting committee — only 12 of the 19 actually vote on rate decisions. In June, seven members signaled that they supported leaving rates unchanged through the end of this year, while two suggested they preferred a single rate cut. The other half supported more reductions, with eight officials backing two cuts, and two — widely thought to be Waller and Bowman — supporting three reductions.

The dissents could be a preview of what might happen after Powell steps down, if Trump appoints a replacement who pushes for the much lower interest rates the White House desires. Other Fed officials could push back if a future chair sought to cut rates by more than economic conditions would otherwise support.

Overall, the committee’s quarterly forecasts in June suggested the Fed would cut twice this year. There are only three more Fed policy meetings — in September, October, and December.

When the Fed cuts its rate, it often — but not always — results in lower borrowing costs for mortgages, auto loans and credit cards.

Some economists agree with Waller’s concerns about the job market. Excluding government hiring, the economy added just 74,000 jobs in June, with most of those gains occurring in health care.

“We are in a much slower job hiring backdrop than most people appreciate,” said Tom Porcelli, chief U.S. economist at PGIM Fixed Income.

This story was originally featured on Fortune.com

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